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Doing Business in Malaysia for Foreigners & Also Locals

Malaysia business

If you have the inclination to type Malaysia Business or Business in Malaysia on the internet’s search engine, a snapshot of the economy of the country will only help you to make a more informed, more prudent decision.

Malaysia is hailed as a success story in transforming the economy in a relatively short span of time. From an Agro and commodity-based economy, Malaysia now has one of the most thriving manufacturing and service sectors in comparison with other countries in Asia.

In terms of value, Malaysia’s economy is the fourth largest among its neighbors in Southeast Asia.

Malaysia attracts a huge number of foreign investors because the country’s economy is considered as one of the most open economies in recent times.

Consequently, the trade to Gross Domestic Product ratio from 2010 onward has averaged above 140 percent. In terms of ease of doing business, Malaysia ranks fourth in Asia according to the World Bank Group’s most recent ‘Doing Business in Malaysia’ report.

The following licenses are needful to startup in Malaysia business as foreigners: –

ParticularsDepartment
a)     Company registrationSSM
b)     Sign Board & PremiseLocal counsel
c)     Bank accountHong Leong, SCB, OCBC, UOB
d)     Export/ importCustom (Kastom) department
e)     WRTMITI & Domestic trade
f)      Halalwww.halal.gov.my
g)     ESD & VisaImmigration department

The Global Competitive Report of 2017 recognizes Malaysia’s economy as the 23rd most competitive country for the tenure of 2017 to 2018.

Malaysia’s economy has thrived in recent years and the country is benchmarked by business pundits for its outstanding infrastructure, efficient banking system financial services sector, skilled and multi-lingual work force, while the compliance and reporting standards are extremely supportive for setting up a business in this country.

Malaysia offers you low start-up expense when you compare it with Singapore and other countries in Asia while the rental rates are also quite low.

The labor cost is considerably well below other Asian countries as well. You will be able to avoid the burden of double taxation in Malaysia because the country has signed 68 double taxation agreements with other nations for your convenience.

Malaysia business News

The World Bank and IFC bank Malaysia in the top position in the world for ease of access to credit, complemented by a first-class public registry and private bureau coverage. Considering safeties to investors, Malaysia ranks within the topmost (5) five countries in this group mainly due to its exceptional regulatory environment.

The objective of the New Economic Model planned by the Malaysian government is to elevate the country to a high-income economy.

In its quest to reach this objective, the government of Malaysia keenly focuses on developing the service sector so the economy can grow to its desired potential.

Furthermore, the service sector has been singled out to become the main catalyst for economic growth in the Eleventh Malaysia Plan, 2016-2021.

The forecast from economists and business analysts identifies the financial services, communications, wholesale and retail trade to provide the strongest thrust for economic growth in Malaysia.

The service sector in Malaysia is expected to create 9.3 million jobs and contribute at least 56.5% to the Gross Domestic Product in 2020 while growing at the rate of 6.8% per year.

Whether you are interested in setting up offshore operations of state-of-the-art technological products or small businesses like a travel agency, fashion house or a gas filling station, you will need to register your business at the Companies Commission of Malaysia.

The Companies Commission of Malaysia or Suruhanjaya Syarikat Malaysia in Malay (SSM in short) is a constitutional body created under the Act of Parliament to regulate corporate and business affairs in Malaysia.

Established in 2002 under the Companies Commission of Malaysia Act 2001, the SSM belongs to the parent department of Ministry of Domestic Trade, Co-Operatives and Consumerism.

SSM primarily carries out the functions of the Registrar of Companies and Registry of Business with its headquarters at Menara SSM, KL Sentral, Kuala Lumpur.

What types of Malaysia business you can operate?

If you are a Malaysian citizen, there are several types of business you can operate in the country. Among the new Small Medium Enterprise (SME) owners in Malaysia, the Sole Proprietorship, Partnership and the Limited Liability Partnership are the most popular options by far.

Malaysians can also start their business as a Private Limited Liability Company. A foreigner can operate mainly three types of business entities in Malaysia.

They are the Sendirian Berhad or Private Limited Liability Company, the Labuan Company while the third option is the representative office.

In Malaysia, you can open a company online as a sole proprietorship business or a partnership. In case of person business who uses as his or her personal name according to his or her identity card or trade name, it will be classified as a sole proprietorship business.

In the case of , the Malaysia business can be owned by two or more individuals but cannot exceed twenty persons. Furthermore, in a you cannot use the identity card name as a business name.

Malaysia Business Act You should know

It is important for you to know that your proposed business may comprise all the forms of trade, expertise, calling, exchange, vocation or any other activity conducted for the purpose of profit excluding any workplace or employment or any charitable mission or any occupation that is stated in the Schedule of the Registration of Business Act 1956 (ROBA 1956) as well as ROBA Rules 1957 in Malaysia.

The limited liability partnership (LLP) combines the pertinent features of a partnership business and a limited company. For this type of partnership, its business entity is separate from the partners.

The LLP is required by law to be comprised of at least two partners and is entitled to purchase property in its own trade name. A corporate body or a person can be a partner in this type of partnership.

This type of partnership business falls under the jurisdiction of the Limited Liability Partnerships Act of 2012. A LLP is quite popular in Malaysia because partners find it quite convenient and flexible to set up and run such a business while they get the platform to compete in the domestic and international markets as well.

Most of the medium sized enterprises in Malaysia are private limited liability or Sendirian Berhad companies. The main cause why private limited liability companies (PLLC) are so prevalent in Malaysia is that the shareholders are protected from the liabilities and are not completely accountable for the debts accrued by the companies.

Among its noticeable features, the LLC is separated from its shareholders or members as a legal entity. The limited liability company falls into two categories in Malaysia: a company limited by shares and a company limited by guarantee.

In a company limited by shares, the nominal value of the shares a person holds will define his or her personal liability by law. In case of limited by guarantee company, the personal liability will not exceed the amount stipulated in the MoA.

The provisions of the Companies Act 1965 deal exclusively with the prerequisites for registering a company limited by shares in Malaysia. In a private limited liability company, the general public is not permitted to own the shares of the company.

Details on CLBG

For a company limited by guarantee (CLBG), the most important liability of the members is restricted by the constitution to the amount members agree to provide for the assets in case the company faces termination.

In terms of a public limited company, a CLBG needs a license from the Ministry of Domestic Trade, Cooperatives and Consumerism to own land or property in Malaysia.

To register a company limited by guarantee, you need to file an application with a constitution to the office of the Registrar under section 45 of the Companies Act 2016.

The purpose of establishing a CLBG is clearly defined by the Act. As a result, the objective of your CLBG will be to promote science, or art, or religion, charity, commerce or industry, pension programs or any activity beneficial for the country in the context of health, education, environment, research, sports or society as a whole.

The CLBG can also offer amusement or recreation and for clarification, the objectives mentioned above cannot be accomplished by any other type of company.

A Labuan Company is primarily established to serve the international market and is entitled to various tax benefits as stipulated in the Labuan Business Activity Tax Act of 1990.

Apart from paying overheads and legal expenses, a Labuan Company must use a foreign currency for its day to day business transactions. It can exist in the form of a company limited by shares or guarantee as well as an unlimited company in Malaysia.

This type of company is quite beneficial especially when a foreigner intends to invest in the financial sector or set up an international trading or distribution business. Foreigners can also have 100 percent foreign ownership of a Labuan Company and the registration procedure for this type of company is reasonably inexpensive and .

It is mandatory for a Labuan Company to have at least a single director and a resident secretary. Authorized share capital necessities do not apply for a Labuan Company as well as the minimum amount of capital to start .

The different classes of shares issued by this type of company will not have any par or nominal value and the company is allowed to trade in treasury shares by law. Several Labuan Companies can merge to form a single business entity.

A registered office is required for a Labuan Company which will serve the purpose of the resident secretary’s office in Malaysia.

Opportunity for foreigner

A foreigner can also operate a business in Malaysia by establishing a Representative Office (“RE”) or Regional Office (“RO”). This office gives the opportunity to evaluate one’s business prospects in the country before committing into a permanent investment.

The RE or RO can only stand for its head office to perform its duties and cannot engage in any commercial activities on its own. It can transmit out the activities to enhance bilateral trade relations (BTR) and encourage of Malaysian commodities while gathering appropriate information on its business outlay and opportunities in Malaysia.

The office will be financed from outside the country and its sphere of influence will be limited to the region it would function in. A foreigner is not allowed to set up a RE or RO without the consent of the Malaysian Government.

Before you start your own Malaysia business, it would be highly sensible on your part to spend some time getting to know the country and its people.

The sooner you can make contacts and friends, talk to locals and foreigners, you will realize the available options that are suited for you, given the skills, products and services you can offer. You may want to know about hiring a company secretary in Malaysia.

The more you know about Malaysia, you will not only be able to make better choices but also avoid the difficulties of doing business in this vibrant country.

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